Question

Read the adjoining table and answer the following questions.

Export, Import and Balance of Trade (Value in US $)
	India		Brazil
Year	Exports	Imports	Exports	Imports
2009-10	178751.4	288372.9	152994.7	127647.3
2010-11	251136	369770	197356.4	180458.8
2011-12	304623.53	489181.3	256038.7	226243.4
2012-13	214099.8	361271.9	242579.8	223149.1

a) What is balance of trade?
b) Tell the types of balance of trades.
c)  In which country export exceeds import in all the years?
d) Brazil’s balance of trade belong to which type?
e) India‘s balance of trade belong to which type?

Answer 1

a. The balance of trade is the difference between export and import between a given period of time. It is an important component of the Balance of Payment. It measures the economic strength of the country's economy

The balance of Trade = Export-Import

b. The balance of trade is the difference between export and import between a given period of time. The balance of trade can be of three types:

• Favourable balance/Surplus: It is the situation where exports are greater than imports. It is always good for a country to maintain a favourable BOT.
• Unfavourable balance/Deficit: It is the situation where imports are greater than exports. For every developing country, the BOT would be largely unfavourable with imports greater than exports.
• Equilibrium balance: It is the situation where imports are equal to exports. It is very difficult for any country to maintain equilibrium in BOT.

c. Exports exceed imports in all the years in Brazil. Brazil is always maintaining a favourable BOT where exports are greater than imports. It is always good for a country to maintain a favourable BOT.

d. Brazil’s BOT belongs to the favourable balance/surplus BOT category. It is the situation where exports are greater than imports. It is always good for a country to maintain a favourable BOT.

e. India’s BOT belongs to the unfavourable balance/deficit category. It is the situation where imports are greater than exports. For every developing country, the BOT would be largely unfavourable with imports greater than exports.